What Is Emotional Trading?
Emotional trading occurs when decisions are driven by feelings rather than logic or strategy.
Examples:
• Fear: Fear of losing money can cause traders to sell too early or avoid making trades altogether.
• Greed: The desire to make quick, large profits can lead to overtrading, holding onto risky positions for too long, or ignoring risk management strategies.
• FOMO (Fear of Missing Out): Seeing others profit from a trend can drive traders to jump into trades late, often at inflated prices.
• Never Ending Cycle of Emotional Trading:
1. Euphoria: After a win, traders feel invincible and take on excessive risk.
2. Anxiety: A sudden market downturn sparks doubt about positions.
3. Panic: Losses lead to irrational decisions, like exiting at the bottom of a dip.
Emotional trading results in;
•Increased Losses
•Stress
How to Avoid Emotional Trading
1. Stick to a Trading Plan
2. Proper Risk Management (TP & SL)
3. Think long term
4. Take Breaks
5. Write daily Trading Diary
Conclusion:
Emotional trading is a challenge that even seasoned traders face. The key to overcoming it is discipline, and sticking to your trading plan.By managing your emotions, you can trade with clarity and confidence, giving yourself the best chance for success.